Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

A committed fund balance is characterized by constraints that have been established through formal action by the highest decision-making authority within the government, such as a legislative body or governing board. This means that the decision to set aside funds for a particular purpose is deliberate and documented, indicating a strong intent to utilize those funds for specific purposes as established by formal policies or resolutions.

This formal commitment implies that any changes to the intended use of these funds would require similar formal action, ensuring that the designation of the funds is respected and cannot be easily altered. This level of commitment adds a layer of accountability and transparency in the budgeting process, reflecting the priorities set by the governing entity.

Other classifications of fund balances, such as assigned or unassigned, do not carry the same level of formal constraint that comes with a committed fund balance. Assignments may reflect the intent of management but do not necessitate formal action, while unassigned balances are those that have not been designated for specific purposes.